HEADLINES
Canada's Economy Grows 3.3% in Second Quarter
Canada's economy notched the strongest growth in years in the second quarter thanks to a surge in exports and strong domestic demand, though the escalation in the trade war with the U.S. casts fresh doubt on how durable the rebound will prove.
Gross domestic product increased at an annualized rate of 3.3% in the April-to-June period, the strongest expansion since the first quarter of 2023, Statistics Canada said.
Growth was broad and led by exports, resilient household spending and a recovery in business investment. The pace would have been even stronger if not for businesses drawing down on inventories. Monthly accounts show growth each month of the quarter, but an advance estimate points to industry-level gross domestic product flatlining in July, in part as a tailwind from the soccer World Cup faded.
Economic Momentum to Stall, Capital Economics Says
Economic Growth Struggled in July
Big Inventory Drag Can't Slow Down Economy
Budget Deficit Sharply Narrows From Year Ago
Canada's budget deficit for the first quarter of the current fiscal year is sharply narrower from the prior year, buoyed by strong gains in personal and sales-tax receipts.
Canada's Department of Finance said the government recorded a budget surplus of C$989 million in June, smaller than the C$3.63 billion surplus from the same year-ago month.
The data may reflect the income gains Canada is netting as a net exporter of crude oil, with energy prices higher as a result of the U.S.-Iran conflict.
Bank of Canada to Focus on Trade Uncertainty
The Bank of Canada next week is likely to acknowledge the strength in the economy prior to the rise in economic tensions between the U.S. and Canada -- but that will mean little given fresh layer of uncertainty now hovering over the country's businesses, says Karl Schamotta, chief market strategist at global-payments firm Corpay.
Canada GDP rose 3.3% annualized in the second quarter, or well above the BOC's 2.5% forecast. In the past week, though, the U.S. has imposed a 50% tariff on certain Canadian imports, and Canada has responded with retaliatory tariffs of their own.
BOC issues its next decision this coming Wednesday.
Laurentian Bank of Canada Profit Falls Amid Higher Costs
Laurentian Bank of Canada logged a lower profit in the third quarter as transformation costs weighed on performance ahead of its planned acquisition and split-up later this year.
The Canadian lender posted a decline in net income to C$1.5 million, down from C$37.5 million in the comparable quarter a year ago. On a per-share basis, however, the company swung to a loss of C$0.08 a share from a profit of C$0.73 a share.
The decline was largely due to costs related to its pivot to a specialty commercial banking model and a sale.
Laurentian Moves to End Dividend Reinvestment Plan
Xanadu Secures Government Financing for Quantum Operation
Toronto-based Xanadu Quantum Technologies said it has secured nearly C$200 million in Canada government financing to build a R&D and manufacturing facility in the country's largest city.
The new operation--with an estimated C$900 million price tag--is expected to develop and assemble advanced photonic and semiconductor components used in quantum computing.
Xanadu expects its new facility to tackle broader commercial problems in drug discovery, battery design and materials science.
G Mining Ventures Gets TSX Green Light to Buy Back 2.54% of Public Float
G Mining Ventures intends to launch a share repurchase program to buy back about 2.54% of its common shares over the next year.
The Brossard, Quebec-based miner said that the Toronto Stock Exchange has approved its normal course issuer bid plan to buy back up to 7.5 million shares for cancellation.
At Thursday's closing price, the value of the shares intended for buyback would be worth about C$413.7 million.
Calian Group Gets TSX Okay Plan to Buy Back Up to 10% of Shares
Calian Group intends to buy back up to 10% of its common shares over the course of the next year.
The mission-critical solutions company said that the Toronto Stock Exchange has approved its plan to launch a normal course issuer bid under which it can buy back up to 994,301 shares for cancellation.
At Thursday's closing price, the value of the shares intended for buyback would be worth about C$74.9 million.
TALKING POINT
How the AI Investment Craze Is Keeping the Global Economy Afloat
By Jason Douglas
TOKYO-In the past few weeks, Canada and the U.S. have launched a bitter trade war, President Trump has escalated his campaign against Iran and bond yields have surged, kindling fears over higher borrowing costs around the world.
The global economy, to some surprise, has taken it all in its stride.
Oil prices remain steady at less than $90 a barrel and stock markets are trading close to recent highs. Summer brought a growth spurt to advanced economies, according to closely watched business-activity surveys, and global trade is buoyant.
Behind this rosy picture is the artificial-intelligence boom that is fueling an investment surge in the U.S. and rocketing exports in Asia.
Those tailwinds are lifting global growth, even as the Strait of Hormuz remains shut and geopolitical tensions persist.
"We have literally a tug of war between the negative supply shock from the Middle East and the positive demand shock from AI," Kristalina Georgieva, managing director of the International Monetary Fund, said this week. As data centers spring up in more countries, AI "is becoming a growth engine for the global economy," she said.
The question now for many economists is, will it last? And how vulnerable will the global economy be if this critical engine of demand falters?
The uncertainty about AI-led growth comes on top of nervousness about a prolonged conflict in the Middle East exhausting energy stockpiles, straining government budgets and firing up inflation.
"Maybe we are just living on borrowed time," said Stefan Angrick, head of Asia-Pacific Economics at Moody's Analytics.
The closure of the Strait of Hormuz soon after the start of hostilities between Iran and the U.S. and Israel in February was disruptive for the world but has so far proved less catastrophic than many analysts initially feared.
Countries drew on abundant energy reserves to replace missing shipments and quickly diversified their purchases to new suppliers, including the U.S.
China, the world's biggest importer of oil, played a big role in keeping global oil demand and prices down by cutting back sharply on imports.
"Chinese oil reserves have been a buffer for the whole world," said Marieke Blom, chief economist at ING.
There were other sources of resilience. The world has learned to use oil more efficiently, squeezing more gross domestic product from each barrel. Many governments around the world have shielded households from rising energy prices with subsidies and handouts, supporting consumption.
In Europe, higher government spending on priorities such as defense and infrastructure has also supported economies still scarred by the more severe energy disruption of 2022, when Russia invaded Ukraine and European gas prices skyrocketed.
But the AI bonanza has emerged as the big offset to the growth squeeze from the energy crunch.
ING estimates the AI frenzy accounts for around a third of the U.S. economy's recent growth, as the data-center build-out sucks in semiconductors, electronics, cables, metals and machinery from around the world.
Exports from China were up by a quarter in July compared with a year earlier, while exports from Japan rose 22%. Taiwan's exports were up by a third and South Korea's jumped 63%.
Even smaller economies such as Thailand are reporting bumper exports as the fever intensifies. Singapore's government upgraded its growth forecast for the year, saying it expects its economy to expand up to 5.5% this year, from 4% previously, as it too benefits from rampant demand for semiconductors and other AI-related components.
Yet just as economists are nervous about an escalation in the Middle East conflict, they also worry the AI boom might not last.
The IMF's Georgieva sounded a note of caution even as she noted the spreading gains from AI, saying the technology's rollout and its economic effects are still uncertain. She mentioned financial stability risks, alluding to what many investors and analysts see as a bubble in AI-related firms' soaring stocks and expanding borrowing.
She warned against complacency from policymakers too eager to put all their eggs in the AI basket. Already, many economists say countries in Asia, above all China, are too dependent on exports and not enough on internal sources of growth such as consumption to power their economies.
"Growth is becoming much more narrow," said Max Zenglein, Asia Pacific senior economist at The Conference Board, an economic research group. That is a risk, he said, as after a spell of breakneck growth in AI demand "we are reaching a point where at least we are going to see a slowdown."
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